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My wife and I have a favorite TV show, Bravo’s “Top Chef.” She likes the fast-moving, out-of-the-box challenges that drive the competition. I like how the chefs prepare so many unique dishes even though they’re following the same recipe. The challenges are timed, and sometimes, rather than serve a failed dish, a chef will scrap it entirely in the name of competition. It’s usually some error in planning or preparation that fuels the final elimination.

It seems to me that developing a self-storage project is a little like being a chef. You start with a broad recipe, add experience, external influence and individual preference, and end up with a final product. Your feasibility study should show you what to expect in your market and locale, so you can build the best project or scrap a bad one in the name of success.

I can give you a good recipe for building self-storage. But as you move through your due diligence, you will likely see that recipe morph into what is demanded by location, market and finances. Building a quality facility is like preparing the right meal: It takes time, preparation, education and discipline.

While the elements of a feasibility analysis should be specific, they probably fall into three broad categories: site quality, market dynamics and financial performance. Quantifying these variables—and qualifying their individual impact on overall feasibility—is the goal.

Ingredient 1: Site Quality

The ideal site has easy access and good visibility from a main road with strong traffic counts. It would be positioned close to the population base but well distanced from competitors. In most markets, convenience of location is important. Of course the dream site would already be zoned for storage, with minimal restrictions on building requirements. If not, you need to know costs and timeframe for a rezoning request. The local zoning/planning/building office can provide this is along with a record of any recent rezoning requests that were approved or denied.

Evaluate the location as it compares to the competitors. Which competitor has the best location and who has the worst? Where does your site rank? Objectively answering these questions can help predict your future.

Often, the prime location for storage is dedicated and zoned for other uses like retail, restaurants, etc. Therefore, when researching the feasibility of your site, find out if there are any barriers to entry. You want your location to be viable and competitive for years. If you’ve got the only site in the market that will allow storage, great! But if your site is the fifth best out of 10, you’ll want to qualify that risk.

Ingredient 2: Market Dynamics

To familiarize myself with a market, I usually start with a certain radius analysis, considering topography, rivers, state lines or traffic patterns. Be sure you understand who is driving by your site, where they live and work.

Your feasibility study should identify your customers, including age and gender, and whether they are homeowners or renters. Different profiles demand different strategies. Recent or projected growth will impact your overall approach to the market. Getting to know customer profiles also helps you understand the local competition that already serves them.

I’ve never really seen a good rule of thumb for determining the total square footage a market can absorb. Many markets have absorbed between 5 and 6 square feet per capita; some markets thrive with 12 square feet per person while others flail with 4. Your feasibility study should provide you with a quantified level of supply and demand.

In evaluating the competition, older “first-generation” facilities do not factor into the competitive analysis the same as new stores. Every facility in the market should be qualified according to individual competitive strength:

What are the features and benefits, and are they well communicated to prospective tenants?

What pricing strategy is used (market rates, concessions, premiums)?

Is there a strong marketing campaign?

Too often, hungry developers begin with a supply number in mind when analyzing a market. Even if there are only 4 square feet per person in the market, that number alone does not quantify what can be absorbed. What drives your future bottom line is demand. A thorough feasibility analysis will give you a picture of what the market demands, needs and can likely absorb over time. Rate and occupancy trends can show whether a market is overbuilt or undersupplied. Stay away from areas with declining rents and occupancies. Moreover, know your customers and competition before you move forward with a big project.

Ingredient 3: Profitability

You can have the best site in the world, in an undersupplied market, but it won’t matter if the returns are not comfortable. Once you’ve learned the market, you need to translate it into expected investment and returns.

Your feasibility analysis should include a financial model with specific assumptions. For example, an increased marketing budget—to perhaps mitigate a marginal site location—will be reflected in the pro-forma. A recommended unit mix and pricing strategy, based on market demands, drives potential revenue. The financial model should also include an approximation of input costs, capital requirements, unit absorption over time, debt load, operating costs and overall returns. This model should be detailed enough for investors, bankers and, of course, you.

The financial portion of your feasibility study should tie everything together by answering these questions:

How long will it take for my project to lease up?

How much reserve is required for interest and operating expenses?

When will the project break even?

When will my occupancy stabilize?

How much should I budget for operating costs?

The Final Dish: Recommendations

Once all of the questions are answered, it’s time to determine if the project is a winner or a loser. Your feasibility study should make clear recommendations on proceeding with development:

Recommended square footage

Phased development

Unit mix (sizes and climate/non-climate ratios)

Pricing strategy

Marketing plan

Features and benefits

The long-term health of your project depends on effective planning during pre-development. A good feasibility study will give you the tools you need for attracting investors and bankers; plus, it will give you objective assurance that your project will bring an acceptable return.

Building a better project begins with a good feasibility study—the recipe for success.

Benjamin Burkhart is owner of BKB Properties LLC and StorageStudy.com. As a consultant to the self-storage industry, he specializes in feasibility studies, acquisition due diligence and loan-package preparation. He can be reached at 804.598.8742; e-mail ben@storagestudy.com.